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Congo mine closures would cause economic and social crisis, minister says

by Reuters
Friday, 17 April 2020 18:08 GMT

(Adds quote from Ivanhoe CEO)

By Helen Reid and Hereward Holland

JOHANNESBURG, April 17 (Reuters) - Democratic Republic of Congo's mining minister warned mine shutdowns due to the COVID-19 pandemic would trigger a "catastrophic" economic and social crisis in the country, as he reported a 15% slump in cobalt exports in the first quarter.

Congo, the world's biggest producer of cobalt, is highly reliant on mining, with the industry contributing 32% of its GDP and 95% of export revenue in 2018, according to the central bank.

"The DRC would not be able to withstand an abrupt halt in the mining production of the flagship projects operating there if they invoked force majeure," Mines Minister Willy Kitobo Samsoni wrote in a ministry analysis seen by Reuters.

Exports of cobalt, a metal used in batteries, fell by 15.2% in the first quarter compared to the same period last year, he said in the memo, while copper exports increased by 12.8%.

"As a result (of mine shutdowns), we risk moving from a health crisis to an economic crisis, which would in turn lead to a social crisis," Samsoni wrote.

The clause of force majeure allows certain terms of an otherwise legally binding agreement to be ignored because of unavoidable circumstances.

Companies mining in Congo's southern copper belt include Glencore subsidiary Katanga Mining, China Molybdenum's Tenke Fungurume, MMG, and Chemaf, while Ivanhoe is developing two copper mines there.

Disruption caused by the pandemic has so far driven Chemaf to shut its Usoke copper-cobalt processing plant, while Ivanhoe has suspended operations at its Kipushi copper mine project.

Restrictions on movement in countries through which Congo's metals are transported could also trigger declarations of force majeure, Samsoni said.

Zambia, a key transit country for copper and cobalt, has mandated all returning residents and foreigners to be quarantined for 14 days in a government facility at their own cost, according to a foreign ministry document seen by Reuters.

A logistics official said this would affect the transport of metals from DRC, as truck drivers would have to go into quarantine on arrival in Zambia.

"This situation cannot be sustained," he said.

Depressed copper prices could also slow the development of new mines in Congo, Samsoni said, with facilities expected to enter production in 2020 or 2021, like Ivanhoe's Kamoa-Kakula project, likely to be postponed.

Ivanhoe Mines Executive Co-Chairman Robert Friedland said the recent copper price decline has not affected the development schedule for Kamoa-Kakula, and that the mine's high expected grade of copper makes it better able to withstand low prices.

"The Kakula mine is making excellent progress on its development," he said in a written statement to Reuters, reiterating the company's previous guidance for first production in the third quarter of 2021.

On April 2 the company said it had locked down the Kamoa-Kakula project with all key personnel on site in order to ensure operational continuity and minimise the impact of the pandemic on the development schedule. (Reporting by Hereward Holland and Helen Reid; Editing by Jane Merriman, Elaine Hardcastle and Jan Harvey)

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